Aon reports that property catastrophe rate pressures have lessened during the mid-year reinsurance renewals, partly due to the introduction of new capacity from the cyclone reinsurance pool.
In a market update, the global broker stated that the 2023 mid-year renewal remained organized and had adequate capacity, albeit at higher pricing due to prevailing challenges.
At the mid-year renewal, the market experienced the advantages of the new capacity introduced by the [pool]. Consequently, the market procured approximately 10-15% less catastrophe limit compared to 2022, alleviating the demand-supply pressure during the renewal.
According to Aon, the pool, which benefits from a $10 billion government guarantee, is expected to take on over 90% of the market’s cyclone exposure for household, strata, and small business property insurance policies.
In the Australian market, the mid-year renewals hold significant importance as the majority of property catastrophe accounts undergo renewal on June 1 and July 1.
Following last year’s floods and the record-breaking weather events in New Zealand this past summer, the market had been preparing for a challenging renewal season.
Aon reports a significant change in reinsurer appetite since the January 1 renewals, which primarily involve the US and European markets. This shift has been described as a “major shift” by Aon.
According to Aon’s Reinsurance Market Dynamics report for June and July 2023, capacity was more accessible, and certain reinsurers exhibited a greater inclination towards expansion.
Despite being delayed, the 2023 mid-year renewal remained organized and orderly. The capacity remained stable and adequate to address the demand, despite several notable catastrophe events in recent years.
During the mid-year renewals, the Aon report indicates that the pressure on terms and conditions, particularly concerning named perils, diminished compared to what was observed during the January 1 renewals.
The report states that the reinsurance market has reached a new level where it can achieve consistent returns and offer insurers protection against volatility, given the current pricing and retention levels.
The renewals in 2024 will heavily depend on the occurrence of catastrophe losses in the second half of the year and shifts in demand and supply, according to the report.
Source : insurancenews.com.au